Will Uber’s new ventures revive its sagging fortunes?
The ride-hailing giant has recently introduced ‘Uber Money’ & intends to launch ‘Uber Eats’ drones in the summer of 2020
Technology-enabled Gig economy champions like Uber have seen limited success as far as making any profits is concerned. The ride-hailing giant has been losing at an alarming rate and tide hasn’t stemmed even after the launch of its IPO in May of this year. Needless to say, this is not sitting well with the investors who are getting nervous.
It’s stock price closed at $27.38 today, down a whopping 39% from its IPO price of $45 bringing down its valuation from the initial $82.4 billion to $46.9 at the time of writing. Uber’s biggest competitor Lyft didn’t fare any better from when it went public back in March of this year. At market close today, it’s price had plummeted almost 40% from the IPO price of $72 with a market cap of $12.92 billion from the initial valuation of $28.2 billion.
Seems like Wall Street doesn’t take well to the idea of unprofitable companies (chart below). Consistent quarterly loss of over $1 billion by Uber is making the investors worried as they continue to dump the stock.
From Uber’s perspective, these are all part of growing pains for a startup. Earlier in March Uber had announced acquiring its Middle East rival Careem for $3.1 billion, thus establishing a strong footprint in an important & competitive region. The company is also extending its reach to financial services & automation to eventually drive the company towards profitability.
The first endeavor is a deeper push into financial services with the launch of a separate division called Uber Money. This would include the creation of a digital wallet & upgrading its debit and credit cards. The initial focus of this project would be to provide ts 4 million-plus drivers and couriers around the world access to a mobile account where they can track their earnings instantly after every ride.
“Not only do you get access to your earnings in real-time, it doesn’t cost you anything to keep the money there and you can spend it whenever you want to.” ~ Peter Hazlehurst, New Division Head
Apart from the digital wallet, Uber is updating the no-monthly-fee Uber Debit Account, powered by fintech company Green Dot which will be integrated with the Uber driver app. This service, which is initially available for drivers in the U.S will be expanded to other countries in the future. The debit card would also offer cashback of 3% to upwards of 6%. And finally, Uber Money will be relaunching the Uber Credit Card where users will receive 5% back in Uber Cash from spending across the Uber platform— Uber Rides, Uber Eats, and JUMP bikes & scooters.
Taking cues from Facebook & Apple, Uber seems well on its way to devise its own financial ecosystem to reward the platform users & keep their loyalty which will be important for it to become profitable in the long run. With the company crossing 100 million monthly active users this year & most of them using credit cards to pay for rides and food orders, it makes sense to provide them with a one-stop solution while generating additional revenue streams.
Talking about Uber Eats — this off-shoot of the ride-hailing giant has become a synonymous name with the home-delivered food market ever since its launch in 2015. The company has now announced an innovative venture for the summer of 2020. At Forbes’ Under 30 Summit in Detroit, the company unveiled a drone (above) with six rotors, which will allow it extra maneuverability in the shape of vertical takeoffs and landings with a range of 18 miles & a flight time of 18 minutes.
Although Uber Eats made $595 million in revenue in the second quarter of 2019, a 72% rise over the same period in 2018, like other segments Uber spends more than it makes — investment firm Cowan estimated that the tech giant loses $3.36 on every Eats order.
Before this new automation can take practical shape the U.S Federal Aviation Administration (FAA) needs to give permission to let Uber fly drones all over the country. For now it FAA has given Uber permission to test its drones in San Diego only. Smaller delivery orders with shorter, simpler routes can create its own logistic challenges with the limited range of the drone. A move that might eventually pay off but will need a lot of streamlining before that.
Under pressure to turn a profit, Uber has stepped up efforts to strengthen its ecosystems powered by innovation. The success of these ventures will determine the long-term prospects of the company.